As an investor, I’ve seen failure addressed in two very different ways. Some founders try to rationalize their failure, by pointing to issues like, “The market wasn’t ready,” “The product wasn’t ready,” or “We were burning through cash too quickly.” To those founders, I often say, Well, whochose the market? Whodeveloped the product? Whospent the cash?
On the other side of the spectrum, I see founders who take responsibility. They own the outcome, and the mistakes that led to the outcome. I wholeheartedly believe that this is the only way to ensure that they won’t repeat their missteps. That said, even among founders who react this way, some see taking responsibility as a lip service, rather than feel it viscerally.
But how do you move forward? After all, taking responsibility is just the first step. Here’s how you can bounce back from failure with grace and dignity.
When it seems like your startup is going downhill, being in the murky area where you keep spending money and are “hoping” for a turnaround is a bad place to be. You need to know: Is this right or not? If the idea isn’t good enough or big enough, determine if you can pivot or change your company’s focus. What do you need to do to restructure? What do you have to do differently? We recently had one of our portfolio companies pivot and replace the CEO–changes that saved the company. Of course, this solution isn’t right for every company. But bad business situations rarely fix themselves–you need to make the call on what needs to change, and execute that decisively.
If the idea is never going to make it, determine how to sell the technology and the talent and return some capital to investors. One of our portfolio companies arranged a talent acquisition to Google. In finding a home for their team members, the founders took care of their engineers and returned all the cash they raised to investors.
As you would with any job, leave on good terms. By treating everyone with respect, you give people another opportunity to remember you in a positive light. You want people to feel as if you treated them as well as possible even though the company didn’t reach its full potential. After all, it is very likely that you will want to start another company, and how you handle your failures now will set a precedent for how likely you’ll get funding for your future endeavors. What goes around comes around. If you flame out, it will be much harder for anyone to support you in the future.